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5 Ways to Save Money for a Car
Car Loans are Not Mandatory
I used to believe that auto loans were a mandatory part of the car purchasing process. Then, I met someone who told me it had always been her family's lifelong policy to only take out loans for two things- a home and education - and that all of their cars had been saved for and purchased outright.
I love the idea of not having to take out a loan for a car - it saves money in the long term, as one would not have to pay interest on a loan - and it also saves a lot of grief and hassle when it comes to worrying about making payments on time every month.
Below I've outlined five easy ways to start saving for a car so that you, too, might free yourself from one more unnecessary loan!
1. Establish clear goals and paramaters
Saving for something is a lot easier when you know exactly how much you need to save. Do some research on the type of car you're looking for and try to get a handle on how much that car will cost.
Once you have established the amount of money you'll need for a car, you can use an savings calculator (one focused on savings instead of loans is better- just Google "savings goal calculator" and you'll find plenty of free tools to use). Enter in the amount you'll need in the end, the initial deposit you'll be able to make, the interest rate you have in the savings account where you'll be collecting your money, and the date by which you'll want to buy your car, and you'll be able to find how much you need to save each month.
As they say, knowledge is power, so knowing these details will make reaching your car savings goals much easier.
2. Establish a fixed amount or percentage you'll devote to your car fund each month and DON'T TOUCH IT!
It's hard to save for much of anything when you allow yourself to raid funds for the odd need or want here or there.
When saving for a car, then, it is important to isolate your savings, and consider your monthly deposits into your car fund money that is not available for anything else. Just consider that money to be cash that was never yours to begin with. Making this mental distinction may help you avoid moments of weakness.
3. Make your saving automatic
You might arrange to automatically transfer a certain amount of money into your car fund every time a paycheck gets deposited into your checking account. Doing so will make regular savings less of a hassle and will require less thought on your part, and can also make saving more of a habit.
4. Reward yourself for good habits
Saving money can be tough, but that doesn't mean the process must be entirely unpleasant. Establish some milestones in your saving process, and celebrate them as they come to pass. For example, when you've saved your first $1,000, treat yourself and a friend to a nice dinner, or go out for something fun, when you've reached $5,000, have a small party, etc...
By breaking the process into smaller goals and celebrating your progress as you go along, it'll be easier to keep up your momentum and not feel overwhelmed by the ultimate amount you want to save.
5. Find a feasible transportation alternative in the mean time
One of the primary reasons why people take out loans for cars is that they need one right away and do not have time to save.
A very important part of saving for a car, then, involves finding a suitable transportation alternative in the mean time. This may involve moving to a place closer to public transport, focusing on telecommuting more, or buying a bike.
If you live in an urban area, public transportation can be sufficient for day-to-day commutes, and convenient car rental options, such as Zipcar, abound for instances in which you need to purchase a large quantity of things or take a trip somewhere more remote. No matter which options you choose, try to keep costs down - that'll allow you to save more money for your future car and purchase it sooner!